Investor sentiment was dampened after the Chinese government over the weekend introduced fresh measures to cool the property market, including higher down payments and interest rates for second-home buyers in cities that are seeing an unprecedented price rise. The latest measures also include a 20 percent capital gains tax on property transactions.

The news that China's non-manufacturing sector expanded at the slowest pace since September also added to the down trend. The country's PMI declined to 54.5 in February from 56.2 in the previous month. The index continues to remain in the area of expansion since the reading is above 50, but the fall in the reading would suggest that the recovery in the world's second-largest economy is moderating.

The data came just two days after an official report showed that Chinese manufacturing activity expanded in February but at a slower rate than in the previous month. Data released by the China Federation of Logistics and Purchasing showed that official Purchasing Managers' Index (PMI) declined to 50.1 in February from 50.4 in January and also fell short of the economists' estimate of 50.5.

“The PMI data were worse than expected and the latest move on the property sector deepens uncertainty about how funds would flow within the Chinese economy. I believe the economy remains on a recovery trend and bank loans were strong in January. But we have yet to see new projects take place and the effect of the latest regulation needs to be monitored,” Chiyuki Shiraiwa, economist at SMBC Nikko Securities, told Reuters.

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